CORY TURNER, HOST:
Hello. It's Cory Turner. And welcome to this episode of our LIFE KIT on how to pay for college. Now, normally, I co-host the LIFE KIT for parenting podcast with Sesame Workshop. And anybody who's listened to that knows I have two young kids. And I'm also - my day job; I'm an NPR education reporter, who's had to cover the rising cost of college. So when the folks at LIFE KIT came to me and said, hey. You want to do a guide on how to pay for college? I was like, oh, yeah.
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TURNER: Well, I've now spoken with a bunch of student aid experts and former students. And if I've learned anything, it's this. The student-aid game of federal and private loans, subsidized and unsubsidized grants and scholarships, work-study, state aid, merit aid, Kool-Aid - it all reminds me of this show I used to watch as a kid.
(SOUNDBITE OF TV SHOW, "AMERICAN GLADIATORS")
MIKE ADAMLE: Hit or be hit, the name of the game - one-on-one, contender versus gladiator. And in this case, for Ted LePage, it's going to be terrible - Turbo.
TURNER: On "American Gladiators," contestants had to complete these bruising tasks while bodybuilder types with names like Nitro and Turbo picked them off. It all felt so unfair, a system rigged against the little guy.
(SOUNDBITE OF TV SHOW, "AMERICAN GLADIATORS")
ADAMLE: But then Turbo, with his great expertise, launches Ted off right at the buzzer. Tell me this young man doesn't have a hard head. Check out these overhand smashes. Turbo lands right on his lad's noggin. Ouch.
TURNER: Ouch. Turns out paying for college can feel like this too because many schools don't include some big costs in their advertised price, or they try to steer students into costly payback plans, or they tell teens they're getting a full-ride when the fine print tells a very different story. But I loved "American Gladiators" because every once in a while, somebody found a way to beat the system. And with this episode, that's my job - to help you beat the system. I've got six great tips for you. Just after the break, in true gladiator fashion, I will be here. But from here on out, I will be the debt destroyer.
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TURNER: All right. Aspiring students - young and old, parents and grandparents, aunties and guardians - if you are currently thinking about how in the world you're going to pay for college, you're in the right place. So let's get to it. Takeaway number one - consider the money-saving power of a transfer. That means attending a community college first for two years, knocking out your basic classes.
CHERYL MILLS: I think you should do the community college first because it's going to cost you half as much.
TURNER: Cheryl Mills didn't go to college until she was 39. She was a stay-at-home mom and had just sent her youngest son to kindergarten. So she started at a community college in Georgia for convenience and to save money.
MILLS: Everybody's doing the same Biology and English 101 and Algebra and Geometry, so everybody has to take those. And it doesn't - I just don't think it matters all that much where you take those because when you transfer to a four-year school to finish the bachelor's degree, your degree is going to be from that school not the community college.
TURNER: Cheryl says she studied English and journalism and, after two years, transferred to a state university. Soon after graduation, she was hired by the Weather Channel and paid off what little student debt she had within six months. So clearly, for Cheryl, that two-year transfer worked great. But we need to say, for many students, it doesn't.
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SANDY BAUM: It's not easy to get all of the credits that you've taken at a community college to count when you transfer.
TURNER: Sandy Baum is a higher ed economist and a fellow at the Urban Institute. And I just have to get this out of the way. You probably heard that bird in the background. Well, special thanks to Sandy. She talked to me while on vacation. And it just so happened every time she opened her mouth, so did the songbird. Is that a real bird in the background or a clock? Or...
BAUM: Oh, I'm sorry. It's a real bird.
TURNER: Oh, that's lovely (laughter).
BAUM: Well, I am on Block Island on vacation. There are birds here.
TURNER: Getting back to the point Sandy was trying to make is that getting credits to transfer from community college to a four-year is, in many places, harder than it should be. And that's just one of many obstacles for these transfer students.
BAUM: So the vast majority of students who enroll in community colleges say they would like to get a bachelor's degree and they plan to continue. But very few of them - only about 14% - actually ever manage to get that bachelor's degree.
TURNER: Now, one thing you can do to make sure you're in that 14% is work with what's called a transfer advisor, not only at your community college but also at the four-year school you want to attend. Kevin Fudge is director of advocacy and community engagement at American Student Assistance. And he says some states are trying to make this process easier with special arrangements between their two-year and four-year schools.
KEVIN FUDGE: If a student is enrolled at a two-year school, provided they maintain a certain GPA, then they have automatic acceptance into a four-year state college or state university. The student then might be also be eligible for reduced tuition when they do transfer to the four-year school. That can be a wonderful way to save money because now you enter that four-year school as a third-year student.
TURNER: There's one more advantage, Kevin says, to starting small and local. You can save even more money living at home. And Kevin has a message for parents.
FUDGE: Rather than dropping $18,000 on room and board, if you took a third of that and provided them with, you know, go backpacking through Costa Rica or eco touring, would that money be better spent that way? Or, you know, saving to help them buy property when they're 22 or 23 so that they don't go away to college, you spend all this money, and then now they're living with you until 27 because they can't afford to live on their own because they have student debt.
TURNER: Now, before we jump to the next takeaway, I need to acknowledge all the teens out there who are yelling at me right now - and have been for the past few minutes - about all of the parties and the social stuff they'd miss with a two-year transfer, especially if they're living at home - and that's a fair complaint. All I can say is, how much do you value those social opportunities? Are they worth the money you'd save using a two-year transfer? That is entirely your call. Now, speaking of cost, takeaway number two - never trust the price tag. Also known as...
ALEX MOORE: You just don't know until you apply.
TURNER: Alex Moore is 24 and the first in her family to graduate from college. She says she applied to just two schools in her home state of Indiana - one a big state university she knew she could afford, the other a small, private liberal arts college, where she says she felt really overwhelmed by the sticker price.
MOORE: Tuition, you know, over 50,000 thousand a year, nearly 60,000 looking at the cost of housing. It all added up really quickly.
TURNER: It's easy for many prospective students like Alex to take one look at a school's advertised price and just give up. But apply anyway, says Zenia Henderson. She's director of member and partner engagement at the National College Access Network or NCAN.
ZENIA HENDERSON: Don't let that price tag scare you. It is definitely overwhelming when you see such a large number like $50,000 per year.
TURNER: But it turns out college is kind of like buying a car. You hardly ever pay the sticker price.
FUDGE: No, I mean, it's a sticker price. So you have to look at what the net price is. So colleges are required to have a net price calculator on their websites. Some are easier to find than others. My general rule of thumb is that - not to discount any college at all, even before you get started, because in many cases, a private institution can cost less than an individual's state institution, depending on how the aid works out.
TURNER: In fact, that's exactly what Alex found when she got her aid package from that private liberal arts school.
MOORE: OK. They're offering me so much money. They're offering me academic scholarships based on my performance in high school, based on, you know, community work and all of this. It seemed very attractive.
TURNER: Alex says, with all that help, she didn't pay anything near the sticker price.
MOORE: That was shocking to me, honestly. I've got out pretty lucky with the package I got. It was much more surprising than I expected.
TURNER: It doesn't surprise Sandy, though. She says private, nonprofit colleges pour a ton of tuition revenue back into discounts like this for students. So much, in fact, that...
BAUM: On average, their tuition price is really about half of what they say it is.
TURNER: That package Alex got included a lot of free money. And we'll get to that in a few minutes. And it's the reason she ended up choosing the small liberal arts college.
MOORE: Once I graduated, I had about the same amount, if not, a few thousand dollars less in debt than a friend of mine who went to Purdue.
TURNER: But that thing we said about how you should never trust the sticker price, well, it works both ways. That's because, Zenia says, it often doesn't include indirect costs.
HENDERSON: Books would be the top one. You have transportation costs that definitely get overlooked in award letters. And then you have basic things, like, just life - right? - like, going out to eat with your friends and buying your shampoo. Who's going to do that?
TURNER: And for those who aren't living on campus, you never want a student forced to choose between buying books and buying food. Now, there's a lot of financial aid out there to help you cover those costs. But to qualify for almost all of it, you've got to get past one big gatekeeper. It's a form that strikes fear into the hearts of students and parents alike. You know its name.
(SOUNDBITE OF FILM, "HARRY POTTER AND THE PHILOSOPHER'S STONE")
JOHN HURT: (As Garrick) We do not speak his name.
ROBBIE COLTRANE: (As Rubeus) Voldemort?
TURNER: OK. It's not that bad, but it is pretty scary. It's called the FAFSA - the Free Application for Federal Student Aid. And takeaway number three is you have to finish the FAFSA. Just be prepared, you know? Accept it. It's going to ask you a lot of detailed questions about your family's financial wherewithal, and it may take you a while. Rest assured, though, even the people in power kind of hate this form. The Republican chairman of the Senate Education Committee - Lamar Alexander is his name, from Tennessee. He does this thing - I know. I'm an ed reporter. I've seen him do it. Whenever he talks about the FAFSA publicly, even though it's mostly done online now, he always happens to have a paper copy on hand.
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LAMAR ALEXANDER: There is something called the FAFSA - the federal aid application form - that 20 million families fill out. It's 108 pages long. I may have a copy of it here, and I'm just about to produce it.
TURNER: He may have a copy. Of course he has a copy. He always has a copy. And as he unfurls it here in this moment, I just love the lady in the background going, oh.
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ALEXANDER: This is it - 108 questions.
UNIDENTIFIED PERSON #1: Oh. Oh.
ALEXANDER: So you take this home to mama or grandma and say, we need to fill all this out. And they say, well, maybe I don't want to fill all this out.
TURNER: (Laughter) I'm going to put that lady in all of my stories. Well, here's the genuinely good news about the FAFSA. It has gotten easier - in fact, a lot easier - to fill out in recent years. And also, many school districts - they have a counselor or advisor who can help you through it if you don't have help at home. In fact, I did a story once a couple years ago. And I shadowed one of these advisors.
MARGARET FELDMAN: This is just instruction, so press next and skip that.
TURNER: Her name is Margaret Feldman. She's at T.C. Williams High School in Virginia.
FELDMAN: So say no to that one. Have you...
TURNER: Margaret was amazing, leaning over shoulders in the computer lab.
FELDMAN: Oh, no.
UNIDENTIFIED PERSON #2: Oh, no.
FELDMAN: (Laughter) It timed out.
TURNER: Sometimes, kids brought in a parent or a grandparent or they put one on speaker phone.
UNIDENTIFIED PERSON #3: (Speaking Spanish).
TURNER: There was always a hiccup.
UNIDENTIFIED PERSON #3: He said he doesn't have his Social Security right now.
TURNER: But Margaret patiently walked them through the FAFSA question by question.
FELDMAN: Do you have your wife's tax return at home?
UNIDENTIFIED PERSON #4: No.
TURNER: So you guys have to come back?
UNIDENTIFIED PERSON #4: Yes, I have to come back. I was hoping it could be finished today.
TURNER: I'm not sure any of the families in that clip would've gotten through the FAFSA without Margaret. And this is really important. Getting through it is still not enough. Zenia Henderson says, once you've submitted the form and you've had a little party for yourself, do not turn your back on the FAFSA because it might be waiting in the shadows to stab you.
(SOUNDBITE OF FILM, "PSYCHO")
JANET LEIGH: (As Marion, screaming)
TURNER: I'm kidding. I'm kidding. I'm not kidding.
HENDERSON: It doesn't end with just submitting the application.
TURNER: Uh oh.
HENDERSON: Yeah. It's not that easy. Submitting is the first step, but there comes a little process called verification.
TURNER: Verification. See; colleges have to verify or, basically, double-check the FAFSA information for roughly a third of students who apply for financial aid. It's kind of like getting flagged by TSA for extra screening at the airport.
HENDERSON: It could be submitting copies of their tax return. It could be submitting another form that asks the exact same questions that the FAFSA already asked in terms of household size, income, et cetera. Now, how a student would find out from the institution if they've been selected for verification is by way of email or by checking their student account portal for that college that they've applied to. And so it could very easily be missed that a student needs to complete these steps if they're not really paying attention.
TURNER: And what happens if they don't finish verification?
HENDERSON: It is likely that their institution will not award them financial aid.
TURNER: So just getting through it is not good enough.
HENDERSON: No.
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TURNER: You ready for some good news now? I know I am. Takeaway number four - there is almost always free money out there. And by free money, I mean a few different things. First, for students from low-income families, the federal government offers something called a Pell Grant.
HENDERSON: So it's been around for about 50 years. And it started as the government saying, you know, we can give this money to students to help them afford college - college affordability, right?
TURNER: The Pell Grant maxes out at about $6,200 a year. And because it comes from the federal government, you can essentially put it in a backpack and carry it to whatever school you want to. Similarly, most states also offer state aid. Sometimes, it's merit-based. Sometimes, it's need-based. And sometimes, it's both. Schools themselves provide nearly half of all the grant aid out there - essentially, a discount off the sticker price - especially the more expensive private, nonprofit four-year colleges we've heard about already. And that's why Sandy Baum, the higher ed economist, says...
BAUM: It can actually be cheaper to go to a high price tag institution that has generous financial aid.
TURNER: As opposed to some other public university. In fact, a student at one of these high-priced private nonprofits receives, on average, about $15,000 in school-based grants. That's not loans, that's grants - free money. And that's another big reason we say never trust the price tag.
There's one more source of free money out there - scholarships; and not just for students with clear financial need or great grades. There are also lots of private scholarships based on students' outside interests.
GRACIE DEROSA: Yeah, so my name is Gracie DeRosa. I'm 20 years old, and I attend Marquette University.
TURNER: Gracie is majoring in advertising and minoring in Spanish. And she got a full-ride scholarship.
DEROSA: It provides free housing, free tuition. Yeah, and it gives it to golf caddies.
TURNER: You heard her right - golf caddies. Turns out Gracie's dad, uncle and sister had all been caddies. And she says she's been doing it since she was 14. Kevin Fudge says there's a scholarship out there for just about everybody.
FUDGE: Well, there's one for, like, a left-handed tuba player and all that. I mean, the general rule of thumb is, you start local, and then you search outward. Think of it as a bullseye, so you're going to get the best return the closer you are to the target, and so you start in your community. Most high schools are going to have - on their school counselor page or the guidance page, they'll have information about scholarships specific to the students at that school.
TURNER: From there, Kevin says, expand your search to your community at large, your city, your state, your region. Focus last, he says, on the most competitive national awards.
FUDGE: I look at some of the national awards as the equivalent of buying, like, a lottery ticket. I mean, could you win? Sure. But the likelihood - I would much focus on, you know, trying to win anywhere from five to 10 smaller scholarships between two and $500 than, you know, exhausting efforts to win, you know, the $25,000 Coca-Cola scholarship or the $50,000 scholarship Ayn Rand to write a sequel to "The Fountainhead" or something like that.
TURNER: From free money now to the kind of aid you have to pay back.
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TURNER: Takeaway number five - student loans are your friend until they're not. Forty-five million Americans currently have student loan debt. That's a lot of money. In fact, we have a whole nother episode for those of you out there who already have student debt. But I want to be clear. This debt, it's not inherently a bad thing. Taking on a reasonable amount of debt to earn a degree that's going to help you get a job or realize a dream, that's a good thing. So how much debt is too much?
HENDERSON: I think that anything over the maximum federal loans is what's too much.
TURNER: Zenia Henderson of NCAN says most students take out federal direct loans. If they're subsidized, that means the government's not charging you interest till you're out of school. So if you're a dependent student in college, you can get a maximum of subsidized and unsubsidized combined of $31,000 in these federal direct loans. Any borrowing above that federal limit, says Zenia, is probably a bad idea.
Now, obviously there's no one-size-fits-all rule here. But Kevin Fudge of American Student Assistance largely agrees with Zenia. Sandy Baum, our higher ed economist, she also says $31,000 dollars is a pretty good limit to set.
BAUM: But that's not because $31,000 is a magic number. It's because if you borrow more than that, you're having to take a private loan, and that makes it a problem.
TURNER: Private loans are the kind you get just by walking into a bank. And there are problems, Sandy says, because...
BAUM: Federal student loans come with lots of protections. Private loans don't, so any amount of private loans is likely to be too much.
TURNER: So let's break this down. Federal direct loans, for example, come with a relatively low interest rate that's fixed. With private loans, the rate is often higher and variable. And that means when the interest rate grows so does how much you have to pay off in the end. Also, federal loans now have incredibly flexible repayment options that take into account how much you're earning. So if you're not earning very much, they're not going to expect you to pay very much as you go. Private loans don't usually do this.
There's one more type of loan we need to talk about. It's a federal loan for parents who want to help their kids pay for college, but it works an awful lot like a private loan.
So, Kevin, when I say Parent PLUS loans, you say?
FUDGE: I give a pause before - and I think before I speak because I have - it definitely incites a reaction in me.
TURNER: As for Zenia, when I say Parent PLUS loan, you say...
HENDERSON: I want to throw up in my mouth is what I say.
TURNER: (Laughter).
HENDERSON: Parent PLUS loans - man, I don't feel fondly of them.
TURNER: Now, again, Parent PLUS loans are federal. Parents can take them out to help pay for their kids' education. But they generally have higher interest rates than the federal direct loans we were talking about earlier. And the repayment options are more demanding than they are for other federal loans.
MICHELLE CAMPBELL: I didn't quite get what $86,000 meant. I figured, well, yeah. College is expensive, duh.
TURNER: Michelle Campbell was 19, living in Minnesota and remembers sitting in a college financial aid office and being told she'd just have to borrow $86,000. And that included a big Parent PLUS loan.
CAMPBELL: And when we finally got down to signing the paperwork, I remember sitting quietly in the office with my dad. And he looked at me and he said, you realize how much money this is?
TURNER: Michelle's dad agreed to sign on to the Parent PLUS loan, but Michelle promised to be the one paying it off.
CAMPBELL: And if I would've sat down and said, OK. Let's divide 86,000 by just $500 just to see, how many payments is that? And how many months of my life and years of my life is that going to be? I think that would've kind of slapped me back into reality and said, yeah, $86,000 is a lot of money.
TURNER: The big hook with Parent PLUS loans is you can borrow as much as you need, but that's also the danger - especially for low-income parents, who are eager to help their kids through college. Kevin says, some schools that serve a lot of low-income students and students of color depend heavily on parents taking out these riskier loans instead of giving students more school-based aid.
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FUDGE: I have seen a financial aid award letter that included a $37,000 PLUS loan...
TURNER: Whoa.
FUDGE: ...To a family that was eligible for the Pell Grant. The likelihood of them being able to repay a $37,000 PLUS loan - now, keep in mind, this was a loan for one year. If you multiply that by the four years it would take to get a bachelor's degree, that parent, theoretically, could have borrowed $148,000 in a parent loan. And so the...
TURNER: That they'd then be repaying at a much higher interest rate with fewer merciful repayment options.
FUDGE: Yes. And so...
HENDERSON: Are you throwing up in your mouth yet, Cory?
TURNER: Little bit.
HENDERSON: Yeah.
TURNER: You know, it's federal, but it feels awfully predatory.
FUDGE: Yeah.
TURNER: There's already a wealth gap in this country between white families and families of color, especially African American households. And while college is supposed to be the key to economic mobility, well, Kevin says these Parent PLUS loans, they often instead widen that wealth gap even further. We've got one more takeaway today. Takeaway number six - relax.
HENDERSON: I think that we are putting way too much pressure on our young people to figure out what they want to be. I think a better question is, what problem do you want to solve? What are you interested in learning more about? What are you interested in fixing?
TURNER: So many teens and - let's face it - their parents, get wrapped up in the allure of an Ivy League education, thinking that if they or their kids don't go to Harvard or Yale or Princeton, then they won't get the job they want or get into the grad program they want. And before you know it, they're old and sad, yelling at other people's kids to stay off the lawn while staring longingly at the dead dreams they keep in a canning jar on the mantel.
To that, Zenia says, stop it.
HENDERSON: I mean, that's definitely not true, that the most elite, you know, highly selective schools - it does not mean you will be happy.
TURNER: Kevin says he often does financial aid nights at high schools.
FUDGE: And I tell the parents, having gone to Harvard, I can tell you personally that they don't dip the textbooks in gold and then open them up and then everybody basks in the golden knowledge that only Harvard has. You know, chem 101 is chem 101. And, you know, the argument can be made, oh, well, I'm getting taught by a Nobel laureate at this school. Like, no, actually, you're not. You're probably getting taught by a teaching assistant while the Nobel laureate is relaxing in his or her office, you know, thinking about his or her next book. I think it's behavioral economics. People equate cost with quality. It costs more, therefore, must be better. It's almost, like, you have to, like, fight your biology, right? You have to, like, be practical and think about where you want to be in a few years and not get so fixated on, this is the one school that's going to make me happier more than any other.
TURNER: Now, I'm not going to tell you that Harvard doesn't matter at all. There is good research on the effects of a top-rated education. Now, for teens who already come from some privilege, it probably won't make a big difference. Sandy says there are lots of very good non-Ivy League schools out there, where students can get what they need.
BAUM: The reputation of an institution matters. But it's not that if you go to number nine or number 10, it matters. It's that if you go to number 10 a number 100, it probably will make a difference.
TURNER: For lower-income and first-generation students, though, top-rated colleges do have a powerful, positive effect. One reason is these are often the schools with the most resources to support them while they're in school to really get them to graduation. And the good news is these are also the schools that can give disadvantaged applicants a lot of grant aid on the front end. So remember. Never trust the sticker price.
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TURNER: I want to end with a survey - came out a few years ago. Gallup polled some 30,000 college grads and found that where graduates went to college hardly mattered to their future well-being or their work lives in comparison to their experiences in college. So what sorts of experiences really seemed to matter? For one, how much student debt they had to take out. And another big one - while they were in school, did they have a great and encouraging mentor? My colleague Anya Kamenetz covered this survey when it came out. And the last line of her story is a quote from Gallup. If you can go to Podunk U debt-free versus Harvard for $100,000, go to Podunk and concentrate on what you do when you get there.
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TURNER: OK, deep breath; we made it. And you remember every single thing I said, right? It's OK. I don't remember either. So let's review.
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TURNER: Takeaway number one - consider the money-saving power of attending a community college for two years, then transfer to a bigger four-year school. Number two...
HENDERSON: Don't let that price tag scare you.
TURNER: Most students don't pay the sticker price. Though, beware of indirect costs, like books and transportation, that can really surprise you. Takeaway number three - never turn your back on the FAFSA, even if you think you're done. Number four - there is almost always free money out there from federal Pell Grants to state aid to school discounts to scholarships for left-handed tuba players. You've got to look, and you've got to ask. Takeaway number five - student loans are your friend until they're not.
HENDERSON: Are you throwing up in your mouth yet?
TURNER: And takeaway number six - relax. Don't let a school's reputation drive your decision. Even the best colleges may not necessarily have the key to your happiness.
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TURNER: And that's all for this episode of LIFE KIT. Big thanks to Sandy Baum, Michelle Campbell, Gracie DeRosa, Margaret Feldman, Kevin Fudge, Zenia Henderson, Anya Kamenetz, Cheryl Mills and Alex Moore. I'd also like to give some love and thanks to the two amazing college mentors I had - Peter Connelly and Monessa Cummins - teachers, advisors, relentless butt-kickers and my campus parents.
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TURNER: For more NPR LIFE KIT, check out our other episodes in this guide. There's one about what you should do once you're in school, how to keep your head above water and keep the bills paid, and another once you're out of school and how to manage that student debt. If you like what you hear, make sure to check out our other LIFE KIT guides at npr.org/lifekit. And while you're there, subscribe to our newsletter so you don't miss anything. We've got more guides coming out every month on all sorts of topics. And as always, here's a completely random tip, this time from Devin Mellor (ph).
DEVIN MELLOR: If you're hand-washing your dishes and you run out of dish soap, just fill the bottle halfway up with water and use that instead. It works fine for your dishes, cleans the bottle so you can recycle it and helps stretch your dollar just a little bit farther.
TURNER: If you've got a good tip or a challenge you want us to explore, please let us know. Email us at lifekit@npr.org. I'm Cory Turner. Thank you for listening.
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